Motilal Oswal Mutual Fund will suspend SIPs in international funds

Motilal Oswal MF will suspend the existing Systematic Investment Plan (SIP) and Systematic Transfer Plan (STP) in three of its international funds from April 1, 2022. The move comes as the RBI has not yet increased the limits investment abroad for mutual funds.

“There’s no point raising money when you can’t deploy it,” says Harshvardhan Roongta, Chief Financial Planner, Roongta Securities. Money raised through SIPs over the past two months could not be deployed by such programs due to restrictions and ended up as cash in the wallet. In the case of index funds, this will lead to tracking error and subsequent underperformance.

All fund houses, as advised by the industry body Association of Mutual Funds of India (AMFI), had stopped accepting lump sum investments in schemes that invest overseas as the industry had reached near its aggregate limit of $7 billion. Mutual funds investing in foreign ETFs continue to accept money from investors as this category has a separate limit of $1 billion, which has not yet been exceeded.

In January, the Motilal Oswal mutual fund had stopped accepting lump-sum investments in three of its international funds, namely Motilal Oswal S&P 500 Index Fund, Motilal Oswal Nasdaq Fund of Funds (FoF) and Motilal Oswal EAFE Top 100 Select Index Fund.

“Motilal Oswal Mutual Fund, along with the rest of the industry, continues to engage with regulators to increase these limits. As there is little clarity on when and to what extent these limits would be raised, we need to take additional steps to meet these regulatory criteria,” the fund house said in a note to investors. Existing mandates will remain in the system and will be automatically reactivated when schemes begin taking new investments. Existing mandates will remain active in the system and will be automatically reactivated when plans start taking new investments.

Dolores W. Simon